New Zealand’s ageing population is driving investment in commercial property occupied by healthcare providers such as medical practices and specialist health businesses.
Alan Henderson, director at property investment company Erskine + Owen, said properties used by specific sectors such as healthcare can command a premium for rental space, making it an attractive option for investors.
“With an increasing number of New Zealanders in an older age bracket, this demographic has ongoing healthcare needs that helps to significantly underpin the revenues of the tenants in these types of buildings,” said Henderson.
According to Statistics NZ the number of people aged 65+ doubled between 1991-2020, reaching 790,000. By 2034 it is expected 1.2 million people will be aged over 65.
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“People are living longer and that creates increased demand on services across the board, but especially in the healthcare sector. There is a strong need for quality buildings to accommodate businesses for the long term to ensure they can service growing communities with an older population.”
Erskine & Owen’s latest investment opportunity is the purchase of a healthcare facility in Havelock North, Hawke’s Bay, as part of its E+O Healthcare Properties Fund LP. The fund is seeking to raise $3.85 million, along with bank finance, to purchase the $6.6 million property.
Henderson said Hawke’s Bay is a popular destination for Auckland retirees who sell up and want a more relaxed environment while still having access to good shopping, entertainment and outdoor activities.
The Havelock North healthcare facility was purpose-built in 2000 and has eight healthcare-related tenants including Te Mata Peak Practice and Bay Audiology. “With a growing demographic requiring a wide range of healthcare services, the Havelock North property has many of those services all in one place,” he said.
Henderson said in an area such as Havelock North, commercial land for development is limited, meaning high-quality premises will be in demand and rents will continue to track up due to low supply of new premises.
“Investment in healthcare property is also resilient to impacts of future pandemic outbreaks, making them in demand as long-term investment options,” he said.
Specialist investment sectors such as healthcare and early childhood centres are becoming increasingly appealing as an alternative to traditional commercial property.
“People will always need medical and daycare services. There is solid demand in regions such as Hawke’s Bay and Waikato where the population is growing, and major development is under way.”
Sectors such as daycare and healthcare also attract significant Government funding, have longer lease terms, and tenants are less likely to relocate due to specialised fitout requirements for medical premises.
The minimum investment in Erskine + Owen’s Healthcare Properties Fund LP is $50,000 with a projected (pre-tax) 5.75 per cent per annum cash return paid monthly. Investment is available only to wholesale investors under Schedule 1 of the Financial Markets Conduct Act 2013.
The Havelock North property is the first property in this fund and further healthcare properties will be added to the E+O Healthcare Properties Fund in the future.
Erskine + Owen has a track record of successful investments in commercial property sectors such as childcare centres and warehousing/industrial. Its first early childhood syndication was released in 2020.
Made up of five early childcare centres purchased for $15.3 million, the Daycare Property Syndicate Limited Partnership has delivered on forecasted returns during one of the country’s most volatile economic periods, and the portfolio of properties now has a market valuation of $17.55 million.
- Article supplied by Erskine + Owen
